Gold opened about $1 lower, then fell sharply on US Andstop-loss selling before physical buying entered the market and helped the price to make a partial recovery.

Some traders said selling by U.S. Funds was responsible for the drop.

Others said the market was reacting to Friday's late newsthat Canadian gold producer Cambior Inc had bought one million ounces to reduce its hedge position.

"It's always 'buy the rumour, sell the fact.' There wassome liquidation of gold positions from New York traders, followed by stop-loss selling," a trader said.

Gold dipped to $290.00/292.00, the lowest since September28.

Cambior, a medium-sized gold miner based in Montreal, saidit purchased one million ounces at an average price of about $300 per ounce and will close out positions by counter-parties totalling 300,000 ounces.

The company was among gold producers which bet heavily onfalling gold prices in their hedge books but faced potential losses after gold suddenly shifted direction to rise sharply beginning in late September.

A rally brought gold from 20-year lows to near two-yearhighs within six weeks following the decision by European central banks to limit gold sales and lending for five years.

Spot silver ended at midday quoted at $5.17/20 per ounce, unchanged from the opening price.

Tael gold at midday was quoted at HK$2,711 per tael, up HK$11 from the opening price of HK$2,700 per tael.